MUMBAI: What is driving the frenetic run in Mukesh and Anil Ambani stocks? "Both brothers harbour ambitions to be called the richest in the world," observes one broker. "With any serious downtrend, investors could end up with huge losses in these companies, and possibly, a macro problem," he said.
Ketan Karani, vice-president of research at Kotak Securities, brushes aside any cause for concern: "In my 20 years in the market, what I've learnt is that the market is always right. If a foreign fund with a billion dollars to invest comes to India, they have to buy into the best companies, and that's exactly what we're seeing," he said.
The combined market capitalisation of the Mukesh Ambani-promoted companies stood at Rs5,19,715 crore at the close of trading hours on October 31, 2007, while Anil Ambani-promoted companies had notched up a combined market cap of Rs2,76,027 crore. The two factions' pooled market valuations, therefore, stands at Rs7,95,742 crore, a 16-fold jump since the passing of Dhirubhai Ambani in July, 2002.
The sons split in June, 2005, and have since charted their own courses, but both seem to have lived up to their father's legacy of creating shareholder wealth like nobody's business.
A skeptical broker said that rather than earnings, many of the Ambani-controlled companies are being valued on a discounted cash flow basis, the caveat being that investors are being very generous with their calculations of potential cash flows that can be generated.
Some like Mukesh's Reliance Petroleum and Anil's RNRL do not yet have significant earnings from operations to show — nor will these flow in the immediate future. The former is yet to commission its refinery at Jamnagar in Gujarat, but its stock has gained 288% this year. Moreover, it has a market capitalisation (Rs1,10,835 crore) that is greater than that of Hindustan Petroleum, Bharat Petroleum and Indian Oil Corporation put together (Rs77,961 crore) — all well-established companies operating in the same space.
Deepak Jasani, head of retail research at HDFC Securities, puts it more mildly: "They (the Ambanis) seem to be experts at gauging market mood and increasing wealth by value unlocking methods," he said.
Anil Ambani's Reliance Energy for example, is spinning out a new company from itself called Reliance Power. Surprise: when the company lists, it could have a market capitalisation of around Rs64,000 crore, higher than Reliance Energy's current market capitalisation of Rs43,000 crore.
RNRL is a shell company owned by Anil Ambani which is waiting for a bonanza when brother Mukesh starts his gas business. Under the separation agreement, RNRL has the right to receive 33% of the gas Reliance Industries produces for the next 18 years. This year, the stock has gone up 439%.
Mukesh's Reliance Industrial Infrastructure, about which we only know of a pipeline that connects BPCL's refinery in Chembur to Reliance Industries' Patalganga complex, has gone up 425%.
Even Mukesh's flagship company Reliance Industries has run up 117% this year.
Ketan Karani, vice-president of research at Kotak Securities, brushes aside any cause for concern: "In my 20 years in the market, what I've learnt is that the market is always right. If a foreign fund with a billion dollars to invest comes to India, they have to buy into the best companies, and that's exactly what we're seeing," he said.
The combined market capitalisation of the Mukesh Ambani-promoted companies stood at Rs5,19,715 crore at the close of trading hours on October 31, 2007, while Anil Ambani-promoted companies had notched up a combined market cap of Rs2,76,027 crore. The two factions' pooled market valuations, therefore, stands at Rs7,95,742 crore, a 16-fold jump since the passing of Dhirubhai Ambani in July, 2002.
The sons split in June, 2005, and have since charted their own courses, but both seem to have lived up to their father's legacy of creating shareholder wealth like nobody's business.
A skeptical broker said that rather than earnings, many of the Ambani-controlled companies are being valued on a discounted cash flow basis, the caveat being that investors are being very generous with their calculations of potential cash flows that can be generated.
Some like Mukesh's Reliance Petroleum and Anil's RNRL do not yet have significant earnings from operations to show — nor will these flow in the immediate future. The former is yet to commission its refinery at Jamnagar in Gujarat, but its stock has gained 288% this year. Moreover, it has a market capitalisation (Rs1,10,835 crore) that is greater than that of Hindustan Petroleum, Bharat Petroleum and Indian Oil Corporation put together (Rs77,961 crore) — all well-established companies operating in the same space.
Deepak Jasani, head of retail research at HDFC Securities, puts it more mildly: "They (the Ambanis) seem to be experts at gauging market mood and increasing wealth by value unlocking methods," he said.
Anil Ambani's Reliance Energy for example, is spinning out a new company from itself called Reliance Power. Surprise: when the company lists, it could have a market capitalisation of around Rs64,000 crore, higher than Reliance Energy's current market capitalisation of Rs43,000 crore.
RNRL is a shell company owned by Anil Ambani which is waiting for a bonanza when brother Mukesh starts his gas business. Under the separation agreement, RNRL has the right to receive 33% of the gas Reliance Industries produces for the next 18 years. This year, the stock has gone up 439%.
Mukesh's Reliance Industrial Infrastructure, about which we only know of a pipeline that connects BPCL's refinery in Chembur to Reliance Industries' Patalganga complex, has gone up 425%.
Even Mukesh's flagship company Reliance Industries has run up 117% this year.